The Japanese economy won’t be hurt or hindered by the decision of Prime Minister Yukio Hatoyama to step down.
In doing so he became the 4th Japanese PM to step down in as many years.
The yen and the Tokyo stockmarket eased a little, but that was as much due to other factors as the resignation.
While the economy won’t be hurt by the latest move, it won’t be helped either, nor will the country’s predicament change one bit: OK growth, high unemployment, deflation, high government deficit and debt (mostly domestic).
It’s been a 20 year dilemma for successive governments, all of whom have been unable to resolve it or find the political will to tackle the problems, except the administration of Junichiro Koizumi, who led Japan from 2001 to 2006.
Since he left, successive LDP administrations and now the current government have struggled to make any meaningful decisions on the economy, the deficit or the level of debt.
The last LDP Governments did make a lasting mark by tackling the deep recession and cranking up spending and the deficit to halt the terrible slide in late 2008 and early 2009.
Japan’s current 4%-plus economic growth is a result of that spending but, more importantly, a direct beneficiary of the rebound in China that has seen more than half Japan’s exports going to that country, especially steel, cars, electronic parts, chemicals and consumer goods.
The rebound in exports (the typical Japanese way of recovering from a slowdown) has not had any impact on the domestic economy which has struggled to break the grip deflation has.
Mr Hatoyama’s Government had no idea how to revitalise the government and the economy, except to stand by and fiddle at the margins.
The government of his replacement won’t make much of an impression either.
Mr Hatoyama yesterday announced his resignation along with ruling Democratic Party heavyweight Ichiro Ozawa who took responsibility for recent fundraising scandals and the mishandling of a US marine base relocation plan for Okinawa.
The mishandling of that plan resulted in a split in the Japanese government on the weekend with the Socialist party leaving the coalition.
Mr Hatoyama’s announcement did not shake markets: the yen fell a touch, then recovered, shares rose and bonds traded, all but unmoved by the news.
An election for a new leader is scheduled for tomorrow.
The departure of the prime minister less than a year after the Democratic party won an historic general election victory over the Liberal Democratic party, reintroduces a note of leadership instability that came to characterise previous administrations.
The DPJ had been steadily losing support since Mr Hatoyama formed his government last September.
Since taking office in September, the Prime Minister had come to be seen as indecisive, pushing down his approval rating and that of his government ahead of upper house elections on July 11.
The Prime Minister had been under rising pressure to go from within his Democratic party after a series of opinion polls indicated support for the government had fallen to 20%.
Also driving the government’s loss of standing has been a series of political funding scandals (which also bedevilled the LDP when it was in office).
These scandals have included the PM and Mr Ozawa, the DPJ’s secretary general and widely seen as Japan’s most powerful politician.
According to media reports, finance minister, Naoto Kan, and Seiji Maehara, the infrastructure minister, are the favourites to succeed Mr Hatoyama as PM.
However, Mr Hatoyama’s departure raises questions over the controversy to relocate the Futenma US marine base on Okinawa.
After failing to find another location for the base, Mr Hatoyama caved in to American pressure to stay with a plan to move to another part of the island.
That decision seems to be up in the air, meaning the new leader will have to go through the same debilitating issue as Mr Hatoyama did for no real solution or gain.
